Like most providers of telemedia services, ATS had already pulled out of the premium SMS business in the USA. A recent surge in unscrupulous cramming ended the industry, but you have to wonder why such alternate billing services seem to work without problems in most other countries, but are almost always problematic in the USA. Industry veteran Bob Bentz discusses why.

King of Prussia, PA — Yesterday, AT&T, Sprint, T-Mobile, and Verizon announced that it will be terminating premium SMS billing for most services in the United States.

CRAM: Efforts by Vermont Attorney General Bill Sorrell led to an end of premium SMS services in the USA.

The move to end premium SMS service was spearheaded by Vermont Attorney General Bill Sorrell. The move was made, in part, due to recent programs where consumers downloaded software on their mobile phones and unscrupulous premium SMS providers charged their mobile phone bills, apparently without the knowledge of those downloading the software. This process is known as “cramming” and is, of course, illegal. Hopefully, the government will pursue the providers of such services in the same manner that they pursued the end of what has been a very viable and legitimate business in most other countries around the world.

AT&T, Sprint, and T-Mobile had actually announced that they were terminating their program in response to the efforts by the Vermont Attorney General and the 44 other attorneys general that were involved in the discussions. Verizon, however, had already announced its intentions to wind down its premium SMS program. Verizon general counsel William Petersen said in a statement: “Verizon had previously decided to exit the premium messaging business because of these changes as well as recent allegations that third parties have engaged in improper conduct in providing premium messaging services to our customers. We are in the process of winding down our premium messaging business.”

“T-Mobile will terminate all billing for premium SMS, except for charitable and political giving, as soon as possible with as minimal impact on our customers as possible,” said T-Mobile CEO John Legere. “We believe in making things right for our customers.” I’m sure the recent cramming charges were a problem for T-Mobile and the other carriers, but no doubt the declining use of such services by the public and program sponsors probably made the decision a little easier for the business. Many premium SMS providers, including ATS, had exited the premium SMS business due to other problems with it, most notably the inability to use shared short codes for premium services.

Why do Alternate Billing Services Work in Other Countries but Struggle in the USA?

Premium SMS was originally thought of as a viable alternative to the decline of 900 numbers. And, it certainly made sense to think that way given the proliferation of mobile phones and the impact of text messaging. But, the service never really caught on in the USA to the same extent that it did in other countries. Certainly, the carrier take was very high, but it is in other countries too. And, just like with 900 numbers, the initial participants were often bottom of the barrel late night television-type services.

There is no doubt that the cramming practices by these unscrupulous providers was a problem, but as one who has worked in alternate billing telemedia industry for 24 years, it is continually frustrating that the United States doesn’t seem to be able to make such services viable when they are completely viable in most other countries around the world! In fact, there are no people that are more like US citizens than our friendly neighbors to the north; and, premium SMS continues to be a perfectly legitimate billing mechanism in Canada.

No doubt, the USA is probably the target of more unscrupulous providers given the shear size of its economy. But, do the US carriers build in enough safeguards to protect itself against such less than altruistic services? Are there holes in the carrier approval and testing process? Why doesn’t the USA have a regulatory service like Phone Pay Plus in the UK?

And, most importantly, do we protect our consumers to a fault?

Let’s face it, I’ve had to give chargebacks to consumers over the years that told me that their “cat dialed the 900 number!”

We had no choice, because our government passed laws (TCPA) that said we are prohibited from making collection efforts if a consumer wanted a chargeback. (Imagine buying a sweater at Macy’s, not returning it, but saying you wanted a refund.)

Maybe that’s the biggest reason why alternate billing services work without problems in so many other countries, but don’t work in the USA.

President Obama has out-earned Governor Romney 73 to 1 in text message donations.

Earlier this year, it was announced that politicians were able to raise money through text message marketing for what is known as premium SMS. Premium SMS uses a short code and consumers text a keyword to the short code to, in this case, make a donation to a politician.

President Barack Obama has always been one to embrace new technology and he rode this considerable advantage to a victory over John McCain in the 2008 election. Well, apparently, he’s at it again.

According to information released by Roll Call, the President has paid the premium SMS provider $84,655 while Governor Romney has paid $1152. The figures come from statistics released by the Federal Election Commission. Roll Call estimates that Obama has earned $836,550 from text message donations while Romney has earned just $1520.

Mitt Romney won’t even have to answer his phone to receive future text message donations.

2012 is shaping up to be a political battleground and now the newest weapon for political fundraising is the candidates use of text messages to earn money for political campaigns.

Certainly, the Obama’s are familiar with using text messages to make money. Mrs. Obama appeared on national television in prime time to help raise money forearthquake victims in Haiti for the Red Cross. The non-profits made money through viewers sending a text message to a short code using technology that Advanced Telecom Services’ offers called premium sms.

Both Senator Romney and President Obama believe that making donations via text message will allow middle class citizens to be able to give money to the campaigns through a convenient method that’s as simple as sending a text message. Both candidates had submitted letters in support of the use of text message donations to their campaigns. One would have to think that, given equal promotion, the Democratic candidate stands to gain more through this new and unique political fundraising effort.

With premium sms for political candidates, consumers will text a keyword to a 5-digit short code (for example, text ROMNEY to 84444). Upon receipt the sender will receive a text message back that confirms the cost of the text message. When the sender replies in the affirmative the charge is attached to the sender’s cell phone bill.

Most of the political text messages will be for $10. If the user contributes $200, the company will need to cap the donations per phone number. It could also send the political registration documents to the consumer to allow them to continue to contribute above and beyond the $200 figure.

PAC’s (Political Action Committees) should really be intrigued by the text message donation option, but they will need to cap the anonymous donations at $50 per month as the law requires.

Political candidates are going to love receiving donations via this convenient method. The only thing that they won’t necessarily like is the ultimate payout. The carriers are the ones doing the billing so they are going to expect the majority of the money, close to half. The mobile marketing company, also known as a service bureau, handling the accounts will also get a piece of the action.

Premium SMS and 900 numbers are frequently used for sweepstakes and contents like “Deal or No Deal”.

Sweepstakes and contests have long been a popular method of promotion for brands and products. Sweepstakes and contests often use 900 number entry or entry via premium SMS.

Sweepstakes and contests are some of the most highly regulated of marketing tactics. Furthermore, sweepstakes are regulated by a complex set of individual state laws that add to the complexity of the already existing national laws.

If you wish to promote a sweepstakes or contest via 900 number or premium SMS, we encourage you to obtain your own legal opinions. The following information is supplied solely as a guideline and is not intended to offer legal advice.

Consideration — Although the actual definition of consideration varies widely from state to state, consideration generally means that a willing participant is required to make a purchase or pay for access to be eligible to enter a game. By using a 900 number or premium SMS, there is an inherent consideration involved.

Sweepstakes — A sweepstakes is a legal game that includes a prize and a game of chance. No consideration is permitted in a legal sweepstakes.

Contest — A contest is a promotional mechanism that includes a prize and is a game of skill. Consideration is permitted in a contest, but there can be no element of chance at any point in a contest.

Lottery — A lottery is a game that includes a prize, a game of chance, and a consideration. Federal legislation and State laws govern all lotteries for promotional purposes. Therefore, you are not able to run a lottery.

So, you may be wondering, how come I see some sweepstakes that do charge people to enter? That may very well be the case, but it is likely that the sweepstakes is offering some “Alternative Form of Free Entry.” In other words, if you wish to run a sweepstakes via a 900 number or premium SMS, like Deal or No Deal did, you need also provide a completely free form of entry whereby the free entrants receive the same opportunity to win the prize as those who have paid for the entry.

Again, if you wish to run any type of sweepstakes or contest, you should not take the content herewith as legal advice, as we are not attorneys. You should consult your own attorney and get the necessary opinion letters prior to running your program.

Please be informed that effective January 1, 2012 Sprint will begin monitoring MT traffic on short codes that exceed a 20% refund rate. In addition, Sprint will review the first 90 days of MT traffic on new premium short codes that launch on or after December 2, 2011.

For codes with a refund rate above 20% in any given month, Sprint will review MT traffic for the month on which they are reporting. For example, if Sprint is using the January refund rate (which is calculated by taking the Nov/Dec/Jan refunds divided by Oct/Nov/Dec revenue), then they will review January MT traffic.